Elon Musk, Tesla Charge Ahead With $2.6 Billion Purchase of SolarCity

Well folks it's official, SolarCity is joining Tesla after accepting a proposed buyout offer by the latter. Tesla made a formal bid to acquire SolarCity a month ago, and the two companies have now reached an agreement to combine forces, creating what Tesla brags is the world's only vertically integrated sustainable energy company.

This is an all-stock transaction with an equity value of $2.6 billion based on the 5-day volume-weighted average price of Tesla shares as of July 29, 2016. As part of the buyout agreement, SolarCity shareholders will receive 0.110 Tesla common shares for each SolarCity share they own, a deal that values SolarCity's common stock at $25.37 per share.

Tesla and SolarCity are no strangers to each other. The two firm have worked on several projects together, including the use of the former's lithium-ion battery packs in some of the latter's solar projects. It should also be mentioned that Tesla CEO Elon Musk co-founded SolarCity and still sits on the company's board.

This is a huge play for Tesla, not just in purchase price but in terms of expanding its efforts beyond electric vehicles, which is what it's most known for. By joining forces as a single company, Tesla's and SolarCity's combined resources can create fully integrated residential, commercial, and grid-scale products that improve the way energy is generated, stored, and ultimately used.

"Now is the right time to bring our two companies together: Tesla is getting ready to scale our Powerwall and Powerpack stationary storage products and SolarCity is getting ready to offer next-generation differentiated solar solutions. By joining forces, we can operate more efficiently and fully integrate our products, while providing customers with an aesthetically beautiful and simple one-stop solar + storage experience: one installation, one service contract, one phone app," Tesla said.

Tesla estimates the two companies combined will save $150 million in the first full year after closing due to the merger. The firm also expects to save customers money by being able to lower hardware and installation costs and by improving its manufacturing efficiency.